IMF warns Nigeria over rising foreign debts

The International Monetary Fund (IMF) yesterday warned the Federal Government about its rising debt profile, especially of foreign loans.

Speaking yesterday at the ongoing World Bank/IMF Annual Meetings in Washington D.C, IMF Director, Monetary and Capital Markets Department Tobias Adrian, lamented that external borrowing in emerging markets and low-income countries, which includes Nigeria, is rising.

Adrian who unveiled the Global Financial Stability Report said such borrowing would become a challenge if resources realised from them are not put to good use.

President Muhammadu Buhari has requested the National Assembly to approve a request to borrow $5.5 billion.

The Federal Government has so far raised $1.5 billion through Eurobond this year and another N100 billion through Sukuk bonds already invetsed in infrastructure funding.

Nigeria’s public debt as at June 2017 stood at $64.19 billion (N19.63 trillion) according to data from the Debt Management Office (DMO).

Adrian said emerging market countries needed to take advantage of improved financing conditions to address imbalances, continuing to reduce private sector leverage where high, and managing external and sovereign debt exposures. He said action is required now because vulnerabilities are building and could put growth at risk in the future.

The IMF Director said despite low interest rates, debt servicing burdens have risen in several economies. And while borrowing has helped the recovery, it has also created new financial risks.

IMF Assistant Director in Fiscal Affairs Department, Mrs. Catherine Pattillo admitted that there are lots of positive reforms in Nigeria, including drive to bridge infrastructure gap particularly in the power sector.

She however urged government to do more especially in mobilizing more non-oil revenues.

On the rising debt profile, she said: “The concern in a number of oil exporters is that unless there is action now, debt which has been rising is a concern because of the interest payments. So, if you have continuing rise in debt, the interest payments would consume a large part of any revenue that you collect and you won’t be able to use that revenue for the objectives of the economic growth and recovery programme like increasing growth and employment”.

“So for insuring that you have the ability to use those revenues for enhancing expenditure, there is a need to make sure that interest to revenue is kept at reasonable level”.

The World Bank has said recovery is underway in Sub-Saharan Africa with the Gross Domestic Product (GDP) growth expected to strengthen to 3.2 per cent in 2018 following a sharp slowdown in the past two years.

This is according to the Bi-Annual Africa Pulse report of the bank which focuses on the economies of African countries, released yesterday in Washington DC.